Date: 20100604
Docket: A-50-10
Citation: 2010 FCA 149
Present: SHARLOW
J.A.
BETWEEN:
PAUL CHEUNG and LIONS
COMMUNICATIONS INC.
Appellants
and
TARGET EVENT PRODUCTION LTD.
Respondent
REASONS FOR ORDER
SHARLOW J.A.
[1]
Paul
Cheung and Lions Communications Inc. (collectively, “Lions”) have appealed, and
the respondent Target Event Production Ltd. (“Target”) has cross-appealed, the
judgment in action number T-702-08 (2010 FC 27). In that action, Target sought
damages and other relief against Lions for copyright infringement and passing
off in relation to Target’s business, the Richmond Night Market, which operated
from 2000-2007. In the last three years the Richmond Night Market was located
on the Vulcan Way Property in Richmond,
British Columbia.
The lease expired in 2007 and was not renewed. Beginning in 2008, Lions
operated a similar market, called the Summer Night Market, at the Vulcan Way
Property.
[2]
Target’s
action was partly successful. It resulted in a judgment that reads as follows:
|
FOR THE REASONS GIVEN ABOVE, THIS COURT ORDERS AND
ADJUDGES that the Plaintiff [Target] is hereby awarded:
(i)
Damages
for copyright infringement and passing off in the amount of $15,000.00 for
which payment Lions and Paul Cheung are liable both jointly severally.
(ii)
Costs
payable on a solicitor and client basis.
(iii)
Interest
pursuant to the Court Order Interest Act, R.S.B.C. 1996.
THIS COURT ALSO DECLARES that copyright subsists in
Target’s Market Site Plan and that copyright was infringed in 2008 on the
Vulcan Way Property with the construction of Lions’ Market.
THIS COURT HEREBY ENJOINS the Defendants from
further infringing the Plaintiff’s copyright in Target’s Market Site Plan by
operating a market which is a substantial reproduction of Target’s Market
Site Plan. For greater clarity, I note that such infringement may be avoided
in a variety of ways including but not limited to:
·
Lions’
purchase of Target’s Market Site Plan;
·
Lions’
redesign of the Lions’ Market so that it is no longer a substantial
reproduction;
·
Lions
closure of the Lions’ Market.
|
[3]
As
mentioned above, the judgment was appealed by Lions and cross appealed by
Target. Lions’ notice of appeal challenges most if not all of the substantive
issues that were decided in Target’s favour. It also challenges the award of
solicitor and client costs on a number of grounds, including the failure of the
judge to give reasons for awarding solicitor and client costs. Lions seek a
stay of the judgment and the related cost assessment proceedings pending the
disposition of the appeal and cross appeal. Their most pressing concern is the
award of solicitor and client costs, for which Target is claiming approximately
$265,000.
[4]
An interim
stay was granted on May 20, 2010 pending the disposition of this stay motion,
subject to the condition that Lions pay into court the amount of damages
awarded at trial, $15,000. That payment was made on May 20, 2010. The stay
order now sought would require the $15,000 to remain in court pending the
disposition of the appeal and cross appeal.
[5]
This
motion was heard by teleconference. At the conclusion of the teleconference I
informed the parties that the motion for a stay would be granted pending the
disposition of the appeal and cross-appeal, subject to two conditions: (1) that
the $15,000 paid into court would be retained pending the disposition of the
appeal and cross-appeal; and (2) that Lions use their best efforts to ensure
that the steps required to have this matter made ready for hearing are
completed expeditiously so that the hearing may be set down at the earliest
available date. I also informed the parties that costs would be in the cause,
and that my reasons for granting the stay would be issued shortly. These are
those reasons.
[6]
In support
of the stay motion, Lions have submitted evidence, which remains unchallenged
and uncontradicted, that (a) Lions Communications Inc. would be rendered
insolvent if required to pay the $265,000 costs pending the outcome of the
appeal, (b) Mr. Cheung has no means of personally paying that amount, and (c)
the costs assessment proceedings will require the expenditure of considerable
resources in terms of time and legal expenses.
[7]
Lions
argues that if the solicitor and client costs are assessed at $265,000 and they
are compelled to pay that amount, they may be unable to recover the payment if
their appeal of the costs award is successful and the cross-appeal fails. That
argument is based on Target’s financial statements filed as exhibits in the
proceedings in the Federal Court. Target argues that its financial statements
demonstrate its solvency. That may be so as of the end of 2008. However, Target
has not provided evidence of its current financial position.
[8]
Based on
the record before me, it is not clear whether the net asset position disclosed
on Target’s 2008 balance sheet takes into account legal expenses of $265,000
that, according to Target’s claim for solicitor and client costs, were incurred
in the Federal Court proceedings. An expense of that magnitude accrued after
the 2008 year end would increase Target’s liabilities to the point where they
would exceed the book value of its assets. Further, it is clear that Target has
not operated a market since the Richmond Night Market closed in 2007. It is
reasonable to infer, based on the evidence before me, that Target would not
have the means to repay Lions $265,000 if the solicitor and client costs are
paid but the appeal is successful and the cross-appeal fails.
[9]
Target
also argues that Lions unreasonably delayed the bringing of this stay motion.
The judgment under appeal was rendered in January of 2010. At the end of March,
Lions learned the amount Target was claiming for its solicitor and client
costs. Less than 6 weeks later, Lions wrote to the court to request an
expedited hearing date for a stay motion, enclosing an affidavit, a draft
notice of motion and a draft memorandum of fact and law. Target’s counsel was
copied with that material. During the intervening period, Lions tried without
success to obtain Target’s consent to defer the steps it was then taking to
enforce the judgment, including the costs assessment proceedings. On the facts
of this case, I am not persuaded that there was unreasonable delay on the part
of Lions.
[10]
I note
parenthetically that counsel for Lions has made a number of allegations of
improper behaviour on the part of counsel for Target. In my view, those
allegations are not well founded and I have disregarded them. The record
discloses that counsel for Target has moved promptly and perhaps somewhat
aggressively to enforce the judgment and protect Target’s interests, and has
not acceded to any requests by counsel for Lions to cease those activities.
However, I have no basis for concluding that any of those actions were improper.
[11]
Target argues
that Lions should be disentitled from claiming equitable relief because they
have come to the court with unclean hands. That argument is based on evidence
that in March of 2010, Lions carried on marketing activities using a site plan
that, according to counsel for Target, is sufficiently similar to the site plan
that is the subject of Target’s copyright claim so as to constitute a further
breach of Target’s copyright. Target argues that Lions should have disclosed
that its marketing activities in March of 2010 used that “similar” site plan.
Target also argues that such use may be a breach of the injunction in the
judgment under appeal.
[12]
I am not
persuaded that Lions had an obligation, when seeking the stay, to disclose that
in March 2010 its marketing activities employed a particular site plan. The
stay motion was not made ex parte. If I accept at face value the
evidence submitted by Target in opposition to this stay motion, Target knew in
March of 2010, before the stay motion was made, how Lions had conducted its
marketing activities in March of 2010.
[13]
As to the
suggestion that Lions has further breached Target’s copyright in the site plan
or has breached the injunction, I note that the March 2010 site plan apparently
used by Lions in that month bears some similarity to Target’s copyrighted site
plan, but it is also different in a number of respects. I am not prepared to
find, based on the limited evidence before me, that Lions breached Target’s
copyright or the injunction in March of 2010.
[14]
In
determining whether to stay a judgment pending appeal, this Court has consistently
followed RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1
S.C.R. 311. According to that case, a stay may be granted if a serious issue is raised on appeal, the appellant will
suffer irreparable harm if the stay is not granted, and the balance of convenience favours the appellant.
[15]
Target has
correctly conceded the existence of a serious issue on appeal. I need not
comment further on the merits.
[16]
As to the
second test, I am satisfied that the financial position of Lions is such that
it is likely to suffer irreparable harm if the stay is not granted. In that
regard, I do not accept the submission of Target that the evidence of
irreparable harm is insufficient or speculative. In my view, the record
supports the inference that the payment of costs in the amount of $265,000
would threaten the ability of Lions Communications Inc. to continue its
business.
[17]
Target has
argued that I should take into account that the costs award may be assessed at
some amount that is less than the $265,000 claimed. Certainly that is possible,
but I have no evidence that enables me to assess the merits of the claim, even
if I were inclined to do so.
[18]
I
acknowledge the authorities in which the prospect of financial difficulty was
held not to meet the irreparable harm test. However, I do not read those cases
as establishing that financial difficulty can never be irreparable harm. In my
view, this is a factual determination that must be made on a case by case
basis.
[19]
I conclude
also that the balance of convenience favours Lions. I infer from the
documentary evidence before me that there is a substantial risk of non-recovery
if the appeal succeeds in relation to the award of solicitor and client costs.
In that regard, I draw an adverse inference from Target’s failure to provide
current information about its financial position. On the other hand, while I
accept that Lions would become insolvent if required to pay $265,000 in
solicitor and client costs now, I have no basis for concluding that Lions’
financial position is likely to become worse, or that Target’s ability to
enforce its claim for solicitor and client costs would be impaired if the stay
is granted and the appeal fails.
[20]
Target has
submitted that if a stay is granted, it should apply only to the execution of
any assessment award. In my view, that is not an acceptable alterative because
it would require Lions to expend resources on the assessment process. Those
resources would be wasted if the appeal of the award of solicitor and client
costs is successful.
[21]
Lions has
sought its costs of this motion on an “elevated scale”, meaning costs assessed
under Column V of Tariff B of the Federal Courts Rules. I see no basis
in this case for departing from the normal scale of costs for this motion
(Column III), or for departing from the usual rule that costs of an
interlocutory motion should be costs in the cause.
[22]
Counsel
for Lions argues, by reference to Rule 420 of the Federal Courts Rules,
that whatever costs are awarded should be doubled because of what he referred
to as an offer to settle made by letter in early May. Counsel for Target says
that the letter in question was not an offer to settle and cannot justify an
award of double costs. In fact, the letter was an offer by Lions to provide
Target with security for the $15,000 damage award (by a payment to counsel in
trust or a payment into court) and not to seek a stay of the judgment, if
Target would stop the costs assessment proceedings, refrain from bringing
contempt proceedings, and make no “collateral attacks” on Lions’ business.
Because I have determined that the costs of this motion are costs in the cause,
it is not necessary to determine at this time whether this letter affects or
should affect the quantum of costs on this motion. That issue should be
addressed when the costs of the motion are determined after the disposition of
the appeal and cross-appeal.
[23]
In their
submissions, both counsel attempted to suggest some amounts that might be
appropriate for a lump sum award of costs of this motion. However, it was apparent
that counsel
were not fully prepared to address the issue of the quantum
of costs. For that reason, I will not fix the costs of this motion.
“K.
Sharlow”
Email this Content